Desktop appraisals – aka virtual appraisals – are here to stay. But they weren't always so commonplace. The appraisal industry’s adoption of desktop appraisals has been three years in the making, ever since the onset of COVID. So how do desktop appraisals work and what are the benefits and challenges of using them? There’s a lot to unpack here, so let’s explore.
How Do Desktop Appraisals Work?
Desktop appraisals are real property appraisals conducted remotely by a licensed or certified real property appraiser. Generally, they’re completed using research from the Multiple Listing Service (MLS) and various publicly available property data sources, including:
Property tax records
Recent property sales data
Existing photos/videos of the property
Existing floor plan(s) of the property
Gross living area calculations
Local real estate market trends
Desktop appraisals have a number of other monikers. They might also be called virtual appraisals, desktop valuations, or remote appraisals.
Desktop appraisals are also closely related to hybrid (or exterior-only) appraisals. In this case, a third-party property data collector would visit the subject property, collect information, and send it to the appraiser. The appraiser then uses the information to complete a desktop appraisal report and develop an estimated opinion of value for a property.
When Do Appraisers Use Desktop Appraisals?
Desktop appraisals aren’t an option for every real estate purchase transaction.
Desktop appraisals are ideal for:
Single-Family Properties. Desktop appraisals are used most often to appraise low-risk, lower value single-family properties that will be used as primary residences.
Initial Property Valuations. Desktop appraisals may be prepared for additional info ahead of property listing or refinancing – and often before the next step of a full-scale appraisal.
Investment Evaluation. Desktop appraisals are helpful for real estate investors to have an idea of the collective value of their properties and to make sound real estate decisions.
Fast Assessments of Value. Remote desktop appraisals may be performed when there are limited appraisers available, when a time-sensitive valuation is necessary, or when a more economical alternative valuation is needed.
It’s important for the appraiser to know when the data is sufficient to complete only a desktop appraisal versus when a traditional in-person property appraisal would better serve the assignment.
How Common Are Desktop Appraisals?
Desktop appraisals are more common these days in our post-COVID world. Widespread use of them began when the Federal Housing Administration (FHA) adopted them in March 2020.
In 2021 and 2022, the FHA, the Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and many private lenders issued permanent guidance for conducting desktop appraisals in a variety of assignments. They have since become valid alternatives to traditional appraisals in certain scenarios.
The Benefits of Desktop Appraisals
On the upside, desktop appraisals are:
More Affordable. Remote desktop appraisals are usually priced significantly less ($75-$200) than a traditional in-person appraisal ($300-$500).
Faster. An appraiser can often complete a desktop appraisal in as little as a few hours to one day while traditional appraisals take two days to a week to complete.
More Flexible. With no house visits to schedule for data collection, appraisers often find that desktop appraisals offer more flexibility timewise over traditional ones.
Able To Be Performed by Trainees. Appraiser trainees may be able to complete some or most of a desktop appraisal, with oversight and guidance from their supervisory appraiser.
The Challenges of Desktop Appraisals
There are a few challenges that come along with desktop appraisals. These types of valuations:
May Not Be Ideal For Complex or High-Value Properties. Desktop appraisals aren’t ideal for appraising newly renovated properties, rundown properties, multi-family properties, or unique high-value properties.
May Not Be as Accurate as Traditional Appraisals. Desktop appraisals are only as accurate as the data that is available. It’s up to the appraiser to determine if they have enough info to complete it.
May Not Be Accepted By Some Lenders. Some private lenders will not accept desktop appraisals during the underwriting process in any scenario.
May Escalate Into Full Appraisals. If there is missing property data, or the appraiser isn’t satisfied with the quality of the information available, a full appraisal follow-up may be necessary.
Appraisers Should Always Follow USPAP and Lender Requirements
When performing any type of real property appraisal, appraisers should always comply with the Uniform Standards of Professional Appraisal Practice (USPAP). These standards establish detailed procedural, ethical, and competency requirements for the appraisal process. This includes determining the scope of work for an appraisal – including when to conduct a desktop appraisal and when to conduct a full in-person appraisal.
Appraisers should also abide by specific lender requirements — and be mindful of the scope of the assignment – when performing any real property appraisal.
Desktop Appraisal Resources
It’s important for appraisers to consult their state appraisal board’s requirements on performing desktop appraisals as well as a private lender’s specific requirements. The resources below offer specifics on how desktop and hybrid appraisals should be handled in transactions backed by government-based lenders.
